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Thursday, October 6, 2011

opportunity loss

When I first took on the approach, the SP500 was around 1130. As the SP500 started collapsing, hitting 1075, I felt pretty good. But I was also very much annoyed. While I took on some trades, I can count about 7 I did not take on (more considering the double downs I did not take), and I most definitely did not hold positions to levels I normally would have.

While technically I did not see a real loss, I bared witness to a lot of opportunity loss. And this feeling is far more frustrating than I thought it would be. Truly.

See, my general strategy is to pin point entry points. Because of the detailed fundamental and technical assessments I do, these initial entry points have low probability risks to the down side. Obviously, conditions change when the fundamentals change. (For instance, Operation Twist caused the dollar spike, commodities to exaggerate their declines and forced the hedgies to liquidate their positions. Hence, SU and POT were all out sells.)

But, I know there is always a probability of a position to go lower. This is why I hold enough cash to re-position or double down at the lower point. Somethings the doubling down process can take a day, a few days, a few weeks or a month or two. I do not fear holding a position for a loss. (For instance, the weakness in AAPL from April - June. Over the years I have desensitized my emotions to short-term losses because I know my homework is the very best.)

Unfortunately, at the moment, I am in the position to which I can not afford to hold a losing trade longer than a month. And since I know the effects of a losing option trade on my portfolio, I am more on edge then normal. I simply could not take on this risk at the moment. Even though I desperately wanted to.